Keeping Current with Texas Real Estate MCE, 2014–2015
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Transcript Keeping Current with Texas Real Estate MCE, 2014–2015
Texas Real Estate
Commission
Ethics MCE
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Canons of Professional Ethics
Fidelity
Integrity
Deftenus V. Dallas Bayue Bend, LTD
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Competence
Licensee
is knowledgeable and is informed on
market conditions, continues education,
stays informed about national, state and
local issues and developments, and
exercises judgment and skill in
performance of their work
Questions the Licensee should ask
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CASE STUDY
Owner entered into property management
agreement.
Broker advised owner to accept Section 8
voucher for less than rental rate.
Broker prepared lease showing lower rent
and higher security deposit and also indicated
rents were past due when they were not.
Owner filed a complaint with TREC.
TREC reprimanded broker, assessed $500,
and ordered broker take 30 hr. course.
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Canons of Professional Ethics
Consumer Information Form – Broker or
inspector must display Consumer Information
Form 1-1 in each place of business.
Discriminatory Practices - No licensee shall
discriminate based on protected classes race, color, religion, sex, national origin,
ancestry, familial status and handicapped
status.
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TREC Complaints
A person may file a complaint with TREC
against a licensee if person believes licensee
violated TRELA.
If appropriate, TREC will investigate
Most frequent issues:
Misappropriation, commingling, general
negligence, false promises, broker
supervision, general negligence, false
promises, rebates, improper referrals.
Intermediary/IABS – no written consent.
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Payments made from the Real Estate Recovery
Trust Account were at an all-time high.
TRELA requires investigating using risk-
based approach
Refund
TREC Advisory Letters
Not formal disciplinary action.
Informal Proceedings
Temporary Suspension
Association Complaints
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Citation Program
TAR has citation policy for faster resolution.
Only certain complaints qualify.
A grievance tribunal determines if
complaint is subject to citation.
If citation is issued, respondent has right to
full hearing rather than pay the fine.
Sanctions include fines and education.
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Chapter 2
Agency Relationships
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Customer or Client?
Customer
What Broker owes customer
What Broker cannot provide to customer
Client
Fiduciary Duties
Information About Brokerage Services and
Agency Disclosure (IABS)
When IABS is not required
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Intermediary
Broker could be in position of assisting two
principals involved in same transaction.
If so, must be an intermediary and must obtain
written permission
Intermediary may appoint different
licensees
Example 1
Example 2
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Intermediary
Example 3
Alternative 1
Alternative 2
Example 4
Broker is solo practitioner? May broker
act as intermediary?
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Intermediary
Example 5
When broker owns small firm and actively
sells, may broker appoint himself?
Example 6
I have a listing, and an unrepresented
buyer wants to make an offer, must I act as
an intermediary?
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Conflicts Arising in Early Termination of Agency
Representation
Agency relationship is highly personal
requiring continuing consent of parties.
Early termination might create liability.
Case Study - Kim v. Ahn
Early Termination
Compensation and Release of Contractual Obligation
Representing a Party Who is Subject to a Prior Agency
Relationship
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Working Both Sides of One
Transaction
Refer to the chart in the
text book that portrays the
scenario where one broker
is representing both the
buyer and the seller.
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Chapter 3
Contract Issues
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Effective Date
Effective date is most crucial date in contract.
Who determines effective date? – May be
seller’s or buyer’s broker
Four elements must be satisfied.
1. Final contract must be in writing.
2. Both buyer and seller must sign final.
3. Acceptance must be unequivocal.
4. Last party to accept must communicate
acceptance.
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Effective Date
If the effective date is not filled in, is there
no contract? – No, parties have mutually
instructed broker to fill in final date.
Is effective date the first day? - No. Buyer
has right to terminate within 5 days of
effective date of 1/1. Buyer may terminate
until 11:59 p.m. on 1/6.
Is the effective date Saturday or Monday?
Elements of final acceptance can be satisfied
on Saturday.
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Paragraph 11 — Special
Provisions
Licensee may insert only factual statements
and business details into contracts.
Inserting a provision that materially affects
legal rights or duties may be unauthorized
practice of law.
Licensees may use TREC adopted NonRealty Items Addendum. (Voluntary)
Case Study - Lewis v. Foxworth
Case Study - Johnson v. Conner
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Paragraph 11 — Special
Provisions
As-Is Clause
Brokerage Fees
Poorly Drafted Clauses
Factual Statements and Business Details
Matters that may be appropriate
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Multiple Offers
In Texas, seller does not have to do anything.
Licensees might argue but seller has several
choices regardless of which offer was first
Deal With Multiple Offers Before You
Receive Them
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Chapter 4
Defect Disclosure
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Seller’s Disclosure of Property Condition
Property Defects- some irregularity that
mars a property’s appearance or causes
some aspect of property to weaken or fail.
Involves appearance or structure.
(Coldwell Banker Whiteside v. Ryan
Equity).
Exceptions to the Seller’s Disclosure Form
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Disclosure
Seller and broker must disclose any known
defect regardless of whom broker represents.
Applies to residential and commercial.
Texas Property Code provides that a seller of
not more than one residential unit is to
complete and deliver a seller’s disclosure
notice.
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Defect Disclosure FAQ
What if I learn there is a defect, but the
seller does not want it disclosed?
Why do multiple variations of seller’s
disclosure notice exist?
Must every seller deliver seller’s
disclosure notice to a prospective buyer?
Is relocation company required to deliver
notice?
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Defect Disclosure FAQ
Must a seller disclose previous death at a
property?
Must a seller disclose prior water
penetration in a property?
Must seller or broker disclose registered
sex offender resides in neighborhood?
Is an off-site condition considered a defect
(eg., roadways, landfills, feed lots, etc.)?
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Defect Disclosure FAQ
Must listing broker or seller provide copy
of a prior inspection report?
May a listing agent instruct a buyer or
buyer’s agent not to provide a copy of the
inspection report the buyer may obtain?
Case Study
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Chapter 5
Advertising
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TRELA prohibits licensee from publishing an
advertisement that:
misleads or is likely to deceive the public
tends to create a misleading impression
fails to identify person causing the
advertisement as a licensee
“Advertisement” updated to encompass
broad variety of electronic communications
Information on a website and behind a
firewall requiring a password or registration,
is not considered an “advertisement.”
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Including Broker’s Name
Rule requires licensees to clearly include
broker’s name in all advertising.
Broker must notify commission within 30 days
of starting or stopping use of assumed name.
See text for examples of correct and
incorrect advertisements.
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Advertising Issues
Teams
Teams & Assumed Names
Corporations & Trade Names
Signs
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Chapter 6
Intellectual Property
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Copyright Infringement
Giving credit to newspaper NOT good
enough for copyrighted material.
Apply to blogs, websites and social media
postings as well as printed materials.
Licensee wishing to give opinion about an
article may simply refer to the article and
should NOT cut and paste entire article.
Copyright FAQs available at
http://www.copyright.gov.
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Other Copyright Issues
Private Industry Association Forms -
created by associations such as TAR, may be
used only by association members.
Photographs and Music - frequently
copyright protected so licensee should be
certain to read all the fine print.
Software - Use licensed software on all
equipment because copyright infringement
lawsuit will eliminate money saved by not
purchasing a license
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Chapter 7
Dispute Resolution
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Mediation
One of the five recognized types of
Alternative Dispute Resolution (ADR).
Mediation resolution procedure - a forum
before an impartial person (mediator) to
facilitate communication to promote
reconciliation, settlement or understanding.
Mediators - no decisions or awards.
In a successful mediation, parties agree on
a settlement in writing.
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Mediation
Mediation has been used to settle a high % of
disputes - many Texas judges require
mediation before hearing a case.
Numerous mediation service providers,
county supported mediation services, private
mediators, university law schools, and
professional and trade associations.
Mediators should remain neutral, but their
expertise can provide valuable guidelines for
settlement.
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Arbitration
Arbitration - forum where parties and counsel
present their positions before an impartial
third party who renders a specific award.
Parties must agree to arbitrate a dispute.
Arbitration procedure calls for complaint or
petition to be filed describing the dispute.
Prevailing party may seek to enforce award
and awards may be appealed on procedural
or due process grounds.
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Chapter 8
Unlicensed Assistants
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Assistants
Determining Brokerage Activity – Is the
activity “real estate brokerage” done “for
another” with intention of collecting something
of value.
Two categories of activities:
Direct: - Where person helps buy, sell or
lease property, negotiating, showing.
Indirect: Licensure required of those who
procure or assist in procuring prospects
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Assistants
May an unlicensed person host an open
house?
May assistants set appointments?
May assistant drive a buyer to a listing
and let the buyer into the home?
May unlicensed assistant answer phone;
place signs; open a property, accompany
inspectors, or place advertisements as
directed by the broker?
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Assistants
May assistant answer phone; place signs;
open a property, accompany inspectors,
or place newspaper ads?
Which functions may an office manager
perform?
Does a bookkeeper need to be licensed?
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Assistants
May unlicensed assistants assist in
arranging financing?
May unlicensed persons serve as property
managers?
What can a licensee do to avoid criminal
or disciplinary actions?
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Chapter 9
TREC Cases
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TREC Cases
Misidentifying a Trust Account
Result: Broker entered into agreed order
TREC reprimanded and assessed $1,500
Not-So-Timely Condo Documents
Both agents didn’t read or understand contract
terms
Result: All licensees entered into individual
agreed orders with TREC
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TREC Cases
False Promises
Result - TREC issued advisory letter that
short sale negotiators not subject to TREC’s
jurisdiction.
Roof Repairs
Result: Buyer’s broker entered into an order
with TREC and was formally reprimanded and
paid penalty of $1,000.
Also agreed to take 30-hour agency course
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TREC Cases
Missing Rent Payments
Result: Broker entered into agreed order to a
probated suspension of license for one-year
and agreed to take 30-hour agency law course
and paid an administrative penalty of $5,500
Ignoring the Client
Result: Broker entered into order admitting he
leased property on terms not authorized and
engaged in dishonest conduct, and agreed to
surrender his license
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